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Types of Mutual Funds and Why SIP is the Right Methods for the Investment

When it comes to investing in mutual funds, the first challenge that almost every investor faces is different types of online mutual funds available in India, ranging from the open-ended fund, close-ended fund, and interval fund to equity funds and balanced funds. However, every option comes with its own challenge and benefits.

Thanks to the online technology that has made it easy to invest in mutual funds in India. You can now perform a lot of tasks online such as knowing mutual funds rates, choosing the right options, etc.

Mutual funds can be classified based on its maturity period and their investment objective. Have a look at mutual funds that are based on the maturity period.

Open-ended fund:

This mutual fund option is a type of fund which is available for subscription on a continuous basis. You can redeem them anytime.

Close-ended fund:

The close-ended fund comes with a defined maturity period. For example, it can be 3-6 years. These funds are open for subscription for a specified period at the time of launch.

Interval funds:

Interval funds have the features of open-ended and close-ended mutual funds. You can use these funds to trade on a stock exchange. They are open for sale or redemption at predetermined intervals.

Now, have a look at the types of mutual funds based on the investment objective.

Equity funds:

Equity funds invest a crucial part of their corpus in stock stocks. They are ideal if you are looking for long-term capital growth. These funds may invest in a wide range of industries.

Debt mutual funds:

These funds usually invest in securities like corporate debenture, corporate, government securities and money market instruments. These funds produce regular income. And unlike equity funds, debt mutual funds are less volatile.

Balanced funds:

These funds invest your money in both fixed and equities income instruments like the pre-determined investment objective of the scheme. If you are looking for a combination of income and moderate growth, then balanced funds are suitable for you.

Equity-linked savings scheme (ELSS):

Equity-linked savings scheme or ELSS is tax-saving schemes. They let you enjoy tax allowance under particular provisions of the Income Tax Act, 1961. ELSS offers you growth-oriented schemes and invests primarily in equities

Thematic funds:

This is another type of mutual funds that invest in a set of sectors that are closely associated with a particular theme like infrastructure. Unlike sector funds, thematic funds come with a broader range to operate in.

Why use SIPs to fulfill your dreams?

These days, SIP (Systematic Investment Plans) of mutual funds has become a reliable and trendy investment route. It’s a method used adopted to invest a fixed sum on a regular basis, in a mutual fund scheme. More and more investors are choosing systematically planned approach to investment and reap benefits. With SIP, you can invest as less as INR 500 per month to cultivate the benefits of markets.  Here are features of SIPs and using these methods can get you closer to your financial goals. Let’s read further to know how you can fulfill your dream through SIPs.

Disciplined approach

A SIP is a disciplined approach to investment. It helps you inculcate a regular saving habit. It is because SIP requires investors to invest a fixed amount of money on a regular basis. According to experts, if you invest a small amount regularly, it can lead to better results than investing in a lump sum. It will also bring you to greater wealth accumulation.

Flexibility:

Flexibility is another benefit of going on the SIP way. With SIPs, you have options to choose the amount you want to invest. It’s simple, convenient and affordable for investing for your future. The good thing is that there is no penalty if you miss out an investment.

No Time Market

Usually, investors time the market. But sometimes they fail and cannot get the update. So, SIP offers you the best way solution by letting you have an option to invest regularly in equity market irrespective of the bull and bear phases.

Better for goal planning:

SIP provides you with a comprehensive way to meet your goal. You can plan for and may achieve your financial goals - be it anything like your wedding, child's education, etc.

So, SIP is an easy way to invest in any of the above mutual funds you want to invest in.



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Naveen
Naveen is a digital marketing professional with over 4 years of experience. Presently, he is incredibly passionate about software, technology, website design, paid marketing, and content marketing.
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